After Hurricane Sandy, there were several opinions that the storm would help boost the economy through spending to rebuild
destroyed houses, businesses, transit, and other infrastructure. Fool Jeremy Bowman highlighted why these opinions were extremely wrong:
Economic activity for the sake of economic activity does nothing. If disasters like Sandy actually benefited the economy, then we could just go out and destroy houses on our own. There’s no need to wait for Mother Nature.
Now, a few months after the hurricane, we can sift through more data to see just how the storm affected the economy. And as the rational argument predicted, it did not benefit the economy.
First, several thousands of workers lost wages. Take a look at the initial unemployment claims from New York and New Jersey following the October storm:
The Federal Reserve Bank of New York writes, “We estimate that roughly 160,000 initial unemployment claims filed in the two states during the month of November were related to Sandy, causing an unprecedented shock to the regional job market.” The sector hit the hardest, in terms of jobs, was leisure and hospitality. Using the less volatile payroll numbers taken from the second week of November, the New York Fed found that 32,000 jobs were lost; the difference between the numbers was attributed to a portion of the 160,000 filers finding new work or being able to return to their old jobs.
While the job levels are evening out over the long term, that short-term joblessness pushed plenty of incomes further into the future than expected. And, as any investor knows, money today is worth more than money tomorrow.
In addition to today’s workers, the storm also disrupted tomorrow’s workers. All of New York City’s more than 1,700 public schools were shut down for a week, with more than 80 of the schools forced to wait even longer before admitting students and several others relocated farther away, affecting attendance. A week will probably not have much effect on the actual skills the kids learn, but with youth unemployment already a nagging issue, it doesn’t help.